Tuesday, September 9, 2014

Supplying cars/vehicles under a rate contract basis, depending upon distance, time and usage of vehicles amounts to 'rent-a-cab service' and is liable to service tax and for this purpose difference between renting and hiring of a cab is an illusory distinction.

Facts:

a)The assessee obtained registration as a rent-a-cab scheme operator and was supplying cars/vehicles to BSNL on a rate contract basis, depending upon distance, time and usage of vehicles supplied to BSNL. Fuel and drivers were provided by assessee and vehicles were to be used at discretion of BSNL.

b)In some cases the assessee hired vehicles from other owners and provided these vehicles to BSNL under the terms of agreements between the parties.

c)The assessee argued that impugned services were not liable to service tax under 'rent-a-cab services', as domain, possession and control of vehicles always remained with assessee. Since he was under the bona fide belief that it had not provided rent-cab-service, no penalty had to be imposed.

The CESTAT held in favour of revenue as under:

1)The scope of the taxable rent-a-cab service was considered in detail by this Tribunal in Ajai Kumar Agnihotri v. CCE [2013] 37 taxmann.com 355/[2014] 43 GST 164 (New Delhi – CESTAT). It was concluded that activities substantially similar to those of the assessee herein constituted the taxable rent-a-cab service and the contrary contention of there being a substantial difference between renting and hiring of a cab was an illusory distinction.